Understand and reduce the cost of recruitment to increase the value of your business

In business, when it comes to achieving profitability, everything has to be measured: salaries and social security contributions, overheads, supplies, production, marketing budget, etc. But there is still one item of expenditure that some organisations sometimes underestimate: the cost of recruitment.

And yet it can easily cost several thousand euros. And this figure rises when you make a casting error and the new employee leaves prematurely.

So there are real issues involved in recruiting well, i.e. hiring a candidate who is aligned with the job and the company... who, in short, wants to stay with you!

How much does it cost to hire someone? What are the various direct and indirect costs to be taken into account? And above all, how can you reduce these expenses?

See all software Recruiting

Recruitment costs: definition

The cost of recruitment refers to the budget allocated to taking on a new employee. This budget covers all the expenditure required to complete the entire process:

• defining requirements ;
• drawing up and distributing the job advertisement ;
• sourcing candidates ;
• sorting CVs ;
• cost of interviews and skills tests;
• onboarding the new employee.

The main advantage of calculating the cost of recruitment is that it helps you to optimise your expenditure, and thereby refine your HR strategy. If you don't take the measure of your real situation, how can you improve it?

💡 Just to give you an idea: according to Le Figaro, the average cost of recruitment in France varies between €3,000 and €10,000. A tidy sum, I'm sure you'll agree!

How do you calculate the cost of recruitment?

To find out how much a recruitment costs, take into account all the direct and indirect costs involved. In fact, all you have to do is add them up.

And if you want to calculate the average cost of all your recruitment over a given period, apply the following formula:

Calculating direct costs

The direct costs of recruitment represent the expenses immediately associated with the candidate search process.

👉 They are easily identifiable and cover several essential aspects:

• placing job advertisements on specialised websites or professional social networks;
• The cost of actively searching for profiles on platforms such as LinkedIn, or canvassing databases, represents a significant item, with a budget that can vary between €500 and €2,000 depending on the duration and complexity of the job;
• technical or psychometric assessment tests, which often have to be paid for;
• participation in job fairs (site hire, logistical costs, etc.);
• software subscriptions or licences, such as ATS;
• the logistics required for face-to-face interviews, etc.

Calculate indirect costs

The indirect costs of recruitment are less visible than the direct costs, but just as important.

They relate to the financial impact on time, internal organisation and productivity. These include the salaries of the employees involved in the recruitment process.

👉 Here are the main indirect costs:

• the time invested by HR teams and managers (analysing CVs, organising interviews, debriefings, etc.) ;
• the cost of the vacancy, as a prolonged absence often results in a heavier workload for the team, or even a drop in sales;
• the temporary drop in productivity while the new employee reaches his or her full potential, etc.

These costs are sometimes underestimated, but their real impact on the budget can be considerable. If you don't anticipate them, you run the risk of ending up with unexpected expenses.

💡 Please note: here, don't overlook an important component, i.e. the loss of earnings resulting from the mobilisation of an employee (a manager, for example) on recruitment. During this period, they will be spending less time on their main tasks, which generate value.

Factor in the costs of recruiting via an external agency

In some cases, companies go through an external recruitment agency:

• to recruit rare or highly specialised profiles;
• for large-scale recruitment
• when there are no internal resources to do the job, etc.

☝️ These expenses are booked as direct costs.

But how much does a recruitment agency cost?

On average, it represents 15% to 25% of the gross annual salary of the new recruit, if the position is in the middle management. This figure rises to a higher level when the task becomes more complicated, as in the case of recruiting penurious profiles, for example, or for management positions.

Add onboarding costs

The cost of recruitment also includes the cost of onboarding the employee, a key stage in the recruitment process.

Onboarding goes far beyond simply handing over the keys to the office. Its aim is to help the employee adapt quickly to the job and understand the company's culture... to avoid getting off on the wrong foot either way.

And above all, it's a process that has to be repeated every time, so it's something to bear in mind if you're planning to hire a lot in the coming months.

👉 Onboarding a new employee includes the following costs:

• training (introductory sessions, e-learning, personalised coaching, etc.) ;
• the HR time required to manage the administrative side of things, and the managers' time to support the new recruit;
• the cost of the tools and equipment the employee needs to be productive, etc.

Anticipating the costs of a recruitment failure

Finally, the best way to anticipate future expenditure is to take into account the costs associated with a potential recruitment failure (even if you're going to do everything you can to make sure that doesn't happen, of course 😉 ).

So what is the cost of poor recruitment?

Depending on the job, it can sometimes be up to 2-3 times the initial cost.

And there's a good reason for this: there are other costs in addition to the unavoidable ones, which are essential if the recruitment process is to be resumed:

• administrative management of the employee's departure;
• legal costs and potential compensation payments;
• the potential loss of productivity if the new recruit does not have the necessary skills or motivation;
• the loss of morale in the team concerned (staff turnover has a major impact on group dynamics!).

Cost of recruitment: example

💡 To get a more concrete idea of how much recruitment can cost, here's a concrete example, concerning a mid-level position with a gross annual salary of €50,000.

In this example, the cost of recruitment is €8,300.

If you are unsuccessful, the cost rises to €18,300.

How can you reduce the cost of recruitment?

Keep a close eye on your expenses

The task of calculating the cost of recruitment that you may have just carried out thanks to our article... doesn't have to be done just once!

It's important to do it over time, with a view to continuous improvement. In fact, various expenditure items are likely to change depending on the situation, market conditions, etc.

🔎 By keeping a close eye on these expenses, you can make ongoing adjustments to improve the profitability of your HR department.

Think about internal recruitment

According to Factorial, the cost of internal recruitment is on average 25% to 50% lower than the cost of external recruitment.

This is because certain costs are simply eliminated, such as those associated with multi-posting advertisements or using a sourcing agency.

Another advantage is the reduction in onboarding costs, as the employee is already familiar with the company culture. What's more, they already have their own equipment.

Opt for co-option

Co-optation is another solution commonly considered by organisations to reduce the cost of recruitment.

Here too, you can say goodbye to the cost of advertising. What's more, the recruitment process is speeded up (and that saves on overheads).

☝️ On the other hand, this system traditionally goes hand in hand with a financial reward for the employee who finds the rare pearl. Factor this into your calculations!

Use recruitment software

This article proves that time is money. So what better way to save time than with recruitment software that automates tasks?

Of course, the price of the tool also enters into the equation, and more specifically into your direct costs. But used properly, it promises an excellent return on investment.

💡 For example, Softy is a software solution that takes care of the recruitment process from A to Z, thanks to its extensive functional coverage: multi-posting of advertisements, application management, tests, management of co-optation and internal mobility, onboarding, etc. All of these operations are centralised, and the platform has an intuitive interface to make operations smoother and faster. What's more, thanks to the latest intelligent technologies, you can avoid costly recruitment errors as far as possible.

Developing your employer brand

Finally, there's the question of your employer brand.

When your employer brand shines, applications pour in, especially from quality candidates who are sometimes hard to spot.

This inexorably reduces :

• certain costs, in particular for sourcing and approaching recruitment agencies;
• turnover, which is costly in the long term.

See all software Recruiting

What should you remember about the cost of recruitment?

Don't take the cost of recruitment lightly: it can run into thousands of euros!

To get the full picture, you need to consider a whole range of expenses: direct and indirect costs, onboarding costs, etc. Not to mention the fact that in the event of a casting error, the "bill" climbs even higher!

In view of this, calculating the cost of recruitment is all very well, but trying to reduce it is even better. The good news is that the levers you can use to do this (using dedicated software, internal mobility, co-option, etc.) will enable you to recruit more cheaply and more efficiently !

Because when you find that rare gem, you're generating long-term value for your company's growth.